Obama Administration, Attacking Insurance Company Profits, Lumps In Some Non-Profits
EmailABC News' Jake Tapper and Kate Snow report:
On Thursday, Secretary of Health and Human Services Kathleen Sebelius issued a report titled “Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System,” in which she pinned the rise of premiums in the individual health care market squarely on the profit margins of large insurance companies.
“I think this kind of rate increase gives a highlight to why the president said a year ago we need to address health reform, comprehensive health reform as part of addressing the economy,” Sebelius said.
The HHS secretary, the former Kansas insurance commissioner, noted that it was not just Anthem Blue Cross in California raising premiums on some customers, but other companies including Anthem of Connecticut and Anthem of Maine.
Sebelius noted in her letter last week to Anthem Blue Cross in California that its parent company, WellPoint Incorporated, earned $2.7 billion in just the last quarter of 2009. Quarterly sales went from $15.1 billion to $19 billion — a 26 percent rise.
"We're seeing this at the same time where not only is there an economic downturn around the country, but we know that insurance companies are not suffering that same kind of downturn," Sebelius said. "The five largest insurers in America have declared more than $12 billion worth of profits in 2009."
At a different point in her press conference, Sebelius said, "Insurance companies in the health insurance market have made 250 percent profits over the last eight or nine years."
Sebelius also included in her report and her public remarks: Blue Cross/Blue Shield of Michigan, Regence Blue Cross/Blue Shield of Oregon and Blue Cross/Blue Shield of Rhode Island.
President Obama also mentioned the Michigan insurer in his presidential address today, lumping in the company with Anthem Blue Cross.
After describing how "Anthem was alerting almost a million of its customers that it would be raising premiums by an average of 25 percent, with about a quarter of folks likely to see their rates go up by anywhere from 35 to 39 percent," he said, "It’s not just Californians who are being hit by rate hikes. Last year, Michigan Blue Cross Blue Shield raised rates by 22 percent after asking to raise them by up to 56 percent."
The president said that the "bottom line is that the status quo is good for the insurance industry and bad for America. Over the past year, as families and small business owners have struggled to pay soaring health care costs, and as millions of Americans lost their coverage, the five largest insurers made record profits of over $12 billion."
The three Blue Cross/Blue Shield companies from Michigan, Rhode Island, and Oregon might be good examples for the administration's argument that something needs to be done to control health care costs.
But it's unclear that they're the bext examples of avaricious, profit-hungry insurance predators.
Because they are all not for profit, and heavily regulated by their state governments.
"We're concerned about the broad brush they're using to paint the industry," Michigan Blue Cross/Blue Shield CEO Andrew Hetzel told ABC News.
"We have a regulatory system" in Michigan, he said. "We have to accept everyone."
This is not to defend any of the non-profits for the way they run their companies. Each has been criticized for premium increases, for not reducing administrative costs enough, for not being efficient or low-cost.
But they are not driven by profits, as the report and Sebelius's comments suggested.
HHS spokesman Nick Papas told ABC News that while the non-profits are cited in the report, the report "mentions those companies but doesn’t discuss their profits. The discussion of profits is only related to for-profit companies."
The title of the section in which the three companies are listed is: "Premiums Rise, Insurance Industry Profits Increase, Health Care Costs Cripple Working Families," and executives from those companies certainly felt lumped in with the companies driven by profits in a report assailing them for "prospering."
As Hetzel tweeted: "#Sebelius report: 'Insurance Companies Prosper, Families Suffer.' #BCBSM lost $133 million on individual plans in 2008. Not prospering."
Papas said, "Families are suffering. … Maybe more important is the fact that these insurance companies – both non-profit and for-profit – requested massive premium increases. Those requests were rejected by state regulators who look at things like company solvency."
That's true, but while Michigan regulators denied Blue Cross/Blue Shield of Michigan's request for a 56 percent rate hike, they did approve a 22 percent premium increase, all while the company had $133 million in losses in 2008 and is projected to have $280 million in losses for 2009.
(Moreover, Michigan was cited in a White House report as having had the lowest percentage premium growth over the past decade of all 50 states.)
Last year, Blue Cross/Blue Shield of Rhode Island CEO Jim Purcell said, the company requested a 6 percent premium increase for individual plans, "and we got zero, so we've been losing money in that book of business for awhile. But we are statutorily required to insure in that area and we continue to do so."
The company, overall, lost $115 million last year.
"We don’t like losing money on any business,, but we understand that in the individual market these are the most vulnerable people becuse they pay 100 percent of their premiums and we understand being the insurer of last resort we have some obligations here," Purcell said.
Purcell said the company's current request for a 10.2-percent increase won't even allow it to break even, though that request was denied in favor of an increase of around 7 percent.
As in Michigan and Rhode Island, Regence Blue Cross/Blue Shield of Oregon is losing money in the state in individual plans. In October 2009, Regence filed a request to increase individual rates by 19 percent; the state approved a nearly 15 percent increase.
This year, Regence Blue Cross/Blue Shield of Oregon made a rate request for 25 percent, and the state approved a 16 percent hike.
Michigan Blue Cross/Blue Shield CEO Hetzel said that "our loss ratio in the individual market is 120 percent," meaning, "We’re paying out $1.20 for every dollar we collect in premiums."
Hetzel said the uninsured "come to us because they have only one place to go. Our pool is unhealthy, and that drives up our cost."
"Our state law requires us to go back and ask for rates that are commensurate with our losses," he said. "Our health plan is strongly regulated. We have to go to the insurance commissioner and ask for permission to raise rates, we have to justify it, and anyone can challenge that request."
Last year, the state attorney general challenged it, for instance.
"And then we have to prove it’s what we need," Hetzel said.
"We make zero profit" on individual plans, he said. "Our reserves have declined for five straight years. … We’re losing hundreds of millions a year on only 7 percent of our total membership" — the ones with individual plans. "The losses on that segment of our business are dragging our business down."
Purcell said the rate increases are almost entirely driven by rising health care costs.
"Even if you cut administrative expenses by 20 percent, that would cause, for example, our 12 percent rate increase to be an 11 percent increase," Purcell said. "It's not about the administrative expenses. It's about the claims expense, which is 90 percent of the bill."
Regence Blue Cross/Blue Shield of Oregon is also a nonprofit, and while it is not required to provide coverage to everyone, individuals who are denied for individual coverage can enter into the state's high risk pool, which also is handled by Regence Blue Cross/Blue Shield of Oregon.
Of Sebelius's charges, CEO Purcell said, "She should know better. She should know better, she was a regulator at one point."
Papas said the report — titled, “Insurance Companies Prosper, Families Suffer" — was not only about insurance company profits.
"The report is a wide ranging look at the many problems with our health insurance system and how families are impacted," Papas said.
He did not explain how the three non-profits cited in the report were prospering.
- Jake Tapper and Kate Snow
Obama: 'Now Is the Time For Common Sense Action' 
Romney Takes Aim at Conservatives
Don’t let the facts stand in the way of passionate Community Organizing:
—The three Blue Cross/Blue Shield companies from Michigan, Rhode Island, and Oregon might be good examples for the administration’s argument that something needs to be done to control health care costs.
But it’s unclear that they’re the bext examples of avaricious, profit-hungry insurance predators.
Because they are all NOT FOR PROFIT, and HEAVILY REGULATED by their state governments.—
Posted by: The People's Democratic Republic of Obama | February 20, 2010, 2:22 pm 2:22 pm
Yep,let’s go ahead and knock those greedy non-profits.Sebelius needs to get on the Yellow Brick Road and pick up a brain.While she is seeing the Wizard maybe she can pick one up for Corpseman Obama-he picked her in the first place.
Posted by: Nephron | February 20, 2010, 2:23 pm 2:23 pm
Worst administration in history.
Posted by: Mike in Costa Mesa | February 20, 2010, 2:33 pm 2:33 pm
When will this administration ‘man up’ and simply decree what acceptable profit rates are for “industries of interest”?
And what exactly is “250% profit over 8 years”? Is that an increase over their annual profits nine years ago? Is it cumulative over the eight years, then compared annual revenues? Seriously, they are inventing metrics to prove their point.
Wellpoint said their problem was that ‘healthy’ individuals were cutting coverage to save money, leaving predominantly sick people to subsidise other sick peoples higher per-capita medical costs.
If only wellpoint could force healthy people to over-pay for coverage they neither want nor need… Yeah, that’s the ticket!
Posted by: N2vip | February 20, 2010, 2:39 pm 2:39 pm
This is. truly the gang that couldn’t shoot straight.
As of this morning at Rasmussen, 23% of likely voters strongly approve of Obama’s performance–a new record low. Forty percent strongly disapprove.
Posted by: Fascist Hyena | February 20, 2010, 3:00 pm 3:00 pm
At some point, the American people will have had enough of a symbiotic health care system designed primarly, not to provide care, but to reward the industry participants. Non-proift Enron like accounting tricks, anti-government corporate driven media narratives, covert racism, fear mongering, and corporate driven polling groups won’t be enough to stop the tidal wave of voter outrage.
Posted by: B.Bear | February 20, 2010, 3:36 pm 3:36 pm
To bad they don’t monitor the waste
and fraud in the government as much as
they hate any business that makes money.
The only think worse than companies ripping us off is our own government who
does less for people and charge more and
seem to lose track of where the money goes. This is the pot calling the kettle
black.
Posted by: wis134 | February 20, 2010, 4:21 pm 4:21 pm
Let’s knock the non profit people, but don’t say a word about the GM CEO getting a 9 million dollar bonus. Oh, that’s right. He already controls GM. Nothing to see here people.
Posted by: wheresmymoney | February 20, 2010, 4:27 pm 4:27 pm
Every day these people sound more and more like Chavez in Venezuela.
Posted by: Denbo | February 20, 2010, 5:26 pm 5:26 pm
No tierra,the people you mentioned at least had a plan,a method.In regard to Corpseman Obama’s administration I keep thinking about that quote from “Apocalypse Now”: “I don’t see any method…at all”
Posted by: Nephron | February 20, 2010, 7:15 pm 7:15 pm
I keep thinking about that quote from “Apocalypse Now”: “I don’t see any method…at all”
Posted by: Nephron | Feb 20, 2010 7:15:48 PM
__________________________________
People see what they’re want to see.
And we already know your agenda – you’ve been smearing the President since before he was elected.
You can’t see the methodical approach because you don’t want to see it. It’s called prejudice.
Posted by: tierra | February 20, 2010, 7:30 pm 7:30 pm
Insurance rates are skyrocketing in response to the Democrats in Congress voted for the ban on the pre-existing conditions exclusion.
It’s like allowing a widow to enroll her recently departed for life insurance so that she can collect.
Posted by: Joe White | February 20, 2010, 8:59 pm 8:59 pm
Insurance rates are skyrocketing in response to the Democrats in Congress voted for the ban on the pre-existing conditions exclusion.
______________________________________
Are they going to return all that money? This isn’t law yet . . .
In other modern countries, everybody is covered from birth regardless. That’s the whole point.
Posted by: tierra | February 20, 2010, 9:37 pm 9:37 pm
2 articles in 2 days in which the Obama administration has problems with the truth.
That’s very troubling.
Posted by: wow | February 20, 2010, 9:54 pm 9:54 pm
“Last year, as working families struggled with rising health care costs and a recession, the five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion, up 56 percent over 2008.”
Posted by: tierra | February 20, 2010, 10:11 pm 10:11 pm
Good article, Tapper. Now, how about a discussion about the Anthem companies that are for profit? And reporting only amounts of increases fails to demonstrate real profits. Real profits should be presented in percentages. What percentage of profit does the for profit health insurance companies make. I think you would find that it is not outrageous at all. Besides what is this administration recommending? That they tax them so they will raise our premiums more? After all, corporations do not pay taxes. They simply add the tax as a cost of doing business and pass it on to the customer. It seems to me we have a very large conflict of interest here by the feds. Just like their persecution of Toyota, they are trying to punish the health insurance companies so they can have a basis for taking them over. That they would use non profit health insurance companies as their first attack reveals this all the more. This administration is a lying, evil entity and they do not deserve the trust of the American people.
Posted by: mickeymat | February 21, 2010, 5:31 am 5:31 am
Companies and their Board of Directors have a fiduciary responsibility to operate their companies in a responsible manner in order to earn a return to their shareholders. To do otherwise is against the law. The federal, state and local governments are the first to profit by taxing companies’ earnings and the earnings of the thousands of employees.
Obama and his appointees are sounding more like Hugo Chavez every day.
Posted by: Patrick49 | February 21, 2010, 6:32 am 6:32 am
This should surprise anyone? Lying is an integral part of this administration. They do think they’re still in Chicago. They do think everyone else in the country is as stupid as they are in Chicago.
Posted by: drjohn | February 21, 2010, 8:50 am 8:50 am
tierra wrote:
“WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion”
Yes, it sounds like a lot……until you divide it by several hundred million people insured, then it’s not really that much yearly profit per customer.
Posted by: Joe White | February 21, 2010, 8:59 am 8:59 am
“Companies and their Board of Directors have a fiduciary responsibility to operate their companies in a responsible manner in order to earn a return to their shareholders”
Sure there are laws to stop companies from ripping-off their shareholders. What’s glaringly obvious however is you most conspicuously failed to mention anything about companies ripping-off their customers, which would be alot more pertinent.
Posted by: Skip | February 21, 2010, 9:05 am 9:05 am
tierra wrote:
“This isn’t law yet . . .”
Do you understand how insurance works? They must project how much it will cost to cover you. Professional actuaries use very complicated mathematical formulas to do this.
When Congress passes a bill such as the despicable piece of trash vomited from this Congress, the insurance company has a fiduciary responsibility to factor that in.
The Democrats and Present Obama know this and cannot be excused from causing this price spike.
It was totally predictable. In fact, many of us have been saying for months that it would occur.
Forcing insurance companies to sell health policies to those who know they are sick but didnt insure themselves is like allowing someone to buy auto insurance after they just wrecked the car, or buy home insurance after the house burned down.
Posted by: Joe White | February 21, 2010, 9:05 am 9:05 am
“Forcing insurance companies to sell health policies to those who know they are sick but didnt insure themselves is like allowing someone to buy auto insurance after they just wrecked the car, or buy home insurance after the house burned down”
Which is why there will always be conflict of interest in for-profit health insurance. We should have gone to single-payer. It’s more fair for everybody–the insurance companies could still have benefited by selling additional coverage. But even so the insurance industry has stated they can cover the costs of pre-exiting conditions as long as the healthy pay into the pool and don’t sit it out till they’re already ill. –But right-wingers cry “socialism” and “government interference” there too. They are clearly part of the problem and not part of the solution.
Posted by: Skip | February 21, 2010, 9:17 am 9:17 am
“Forcing insurance companies to sell health policies to those who know they are sick but didnt insure themselves…”
What if they did insure themselves, but it was with a different company and they lost that coverage when they lost their job. What then? Don’t worry–I won’t be holding my breath. You guys only have criticisms, you don’t have any answers.
Posted by: Skip | February 21, 2010, 10:04 am 10:04 am
“It was totally predictable”
Yes like you said: It was “fiduciary”. The shareholders can trust these companies to gouge their customers in order to keep profits up even though we’re in hard financial times…and so can we.
Posted by: Skip | February 21, 2010, 10:14 am 10:14 am
The shareholders can trust these companies to gouge their customers in order to keep profits up even though we’re in hard financial times…and so can we.
—
Like the gouging mentioned on page 19. I have the option of not buying insurance from a company. Where’s my option of not paying taxes? I’ll ask Timmy G for help on this…
Posted by: Excise | February 21, 2010, 11:43 am 11:43 am
The Obama/Pelosi/Reid administration has no problem governing AGAINST the will of the people. AMERICANS DO NOT WANT GOVERNMENT-RUN HEALTHCARE. Why, after 14 months, would the Republicans trust obama’s, or any other dem’s, motives in “bi-partisanship” especially after Obama has laid out the game rules prior to meeting? The Republicans are being “set up” for more of the “blame game”.
Posted by: Proud American | February 21, 2010, 11:50 am 11:50 am
Obama hates the insurance companies so much that he’s going to force millions of Americans to buy their product at virtual gunpoint…..that will show them who’s the boss.
Posted by: Mike L | February 21, 2010, 12:54 pm 12:54 pm
Obama hates the insurance companies so much that he’s going to force millions of Americans to buy their product at virtual gunpoint…..
______________________________________
Let’s hope a public option gets shifted into this mix.
Posted by: tierra | February 21, 2010, 2:30 pm 2:30 pm
Curiouser and curiouser!
Posted by: DontGet818OnMeNow | February 21, 2010, 2:30 pm 2:30 pm
Look, I know she is a nice lady…makes and impressive appearance as one of the POTUS’ WestWingers, but she is definitely over her head in her position. I am not a big fan of Anthem for personal reasons either, but may I suggest that our HHS Secretary learn that Anthem in this state may organizationally not be the same as Anthem in another state. Why doesn’t she give us a speech entitled “What Are We Gonna Do about Medicare DisAdvantage Plans……now there’s a hot subject for anyone with some knowledge of the insurance business and government.
Posted by: justj joey | February 21, 2010, 4:25 pm 4:25 pm
“But right-wingers cry ‘socialism’ and ‘government interference’ there too.”
Posted by: Skip | Feb 21, 2010 9:17:20 AM
Posted by: James Danley | February 21, 2010, 10:40 pm 10:40 pm
“But right-wingers cry ‘socialism’ and ‘government interference’ there too.”
Posted by: Skip | Feb 21, 2010 9:17:20 AM
———————————–
THIS IS government interference and if passed WILL BE one more step towards socialism!
Posted by: James Danley | Feb 21, 2010 10:40:05 PM
___________________________________
You called it Skip.
Posted by: tierra | February 21, 2010, 10:58 pm 10:58 pm
Tierra or Skip, please explain how the new power to block excessive rate increases by health insurance companies IS NOT government interference. And who will define what is excessive?
If this were to pass, the federal government will be able to force increased costs on insurance companies (i.e., forcing insurance companies to cover procedures they don’t currently cover) and then block the insurance companies from passing on the additional costs to their customers by declaring the increase as excessive.
The Obama Administration is the most anti-business/anti-Capitalist administration in history.
Posted by: James Danley | February 22, 2010, 12:32 am 12:32 am
Posted by: James Danley | Feb 21, 2010 10:40:05 PM
The key word is excessive, and the language will matter a lot. Also note that in an article at the LA Times (about how broken the market is for individual policy holders, who are frustrated and feel trapped) Dianne Feinstein talks about her legislation, which is what Obama is incorporating here, using the language “unjustified”:
“Sen. Dianne Feinstein (D-Calif.) announced Friday that she would introduce legislation next week to dramatically expand federal authority over health insurance premiums. Her bill would allow the secretary of Health and Human Services to review, modify or deny “unjustified” increases in states such as California where insurance commissioners have limited authority.”
My understanding is that while Anthem is citing medical inflation as the cause of the excessive rate increases, the rate increases far outpace medical inflation, yes?
Posted by: progressive mama | February 22, 2010, 12:40 am 12:40 am
The Obama Administration is the most anti-business/anti-Capitalist administration in history.
Posted by: James Danley | Feb 22, 2010 12:32:50 AM
Another person given to gross exaggeration. LOL. First, I’d limit the exaggeration by putting a U.S. or American in there somewhere, and then I’d fact check myself if I were you– before others do it for ya.
I’d also wait to find out the facts before jumping to conclusions.
And if you’re an insurance or oil shill, you might just want to admit that upfront.
Posted by: progressive mama | February 22, 2010, 12:46 am 12:46 am
Progressive mama, if an insurance company raises their rates excessively their customers have the option to drop that company and shop elsewhere. THAT is what makes the free market great! If, on the other hand, the federal government steps in and controls price increases they will drive the private sector out of business–obviously the ultimate objective.
Posted by: James Danley | February 22, 2010, 12:52 am 12:52 am
Oh I forgot, everything must be absolutely literal. CORRECTION: The Obama Administration is the most anti-business/anti-Capitalist American administration in American History. I’ll let you prove me wrong!
Posted by: James Danley | February 22, 2010, 12:59 am 12:59 am
if an insurance company raises their rates excessively their customers have the option to drop that company and shop elsewhere. THAT is what makes the free market great!
–
It would make it great if there were indeed a free market full of options and free of monopolies or oligopolies, but there isn’t, and hence it makes perfect sense to treat insurers more like public utilities, which are typically regulated heavily, than grocery stores, barber shops or independent book stores, particularly when the country is facing a disaster and this could be seen as falling under public health, a common good.
I’ve noticed, as an aside, that the word anti-business is usually used by Republican corporate types– not conservatives, necessarily, but Republians– who are *really* talking about Wall Street and the giant monopolistic corporations that are strangling smaller businesses, workers and democracy. Being pro-health care reform, looking out for the self-employed and small business owners who feel trapped by the individual and small group market and ridiculous premium increases that seem unjustified isn’t AT ALL about being “anti-business” at all. No way. It is about being in favor of a level playing field, where the small and medium business owners, and the hard working and innovative self employed have a fair chance to compete. It’s pro-business.
Posted by: progressive mama | February 22, 2010, 1:13 am 1:13 am
I’ll let you prove me wrong!
Posted by: James Danley | Feb 22, 2010 12:59:08 AM
I don’t know if you’ll think this proves you wrong or not (probably not) but others might find it interesing and it presents another view in favor of small business (versus the goliaths you seem worried about) –at Washington Monthly, “Who Broke America’s Jobs Machine” by Barry Lynn and Phillip Longman.
Posted by: progressive mama | February 22, 2010, 1:49 am 1:49 am
If people didn’t choose to be so ignorant on the subject they would know to buy insurance from a ‘mutual’ company. In such a company the policy holders are also the share holders. Everyone has an interest in keeping costs down and keeping the company solvent. And when the company does well, the policy holders benefit from lower (or slower growing) premiums.
There are numerous market-based reforms that could be pushed by congress and the administration but those reforms wouldn’t give democrats the control over individuals that they crave. And this really is all about control and power and buying votes.
Posted by: Keith | February 22, 2010, 10:11 am 10:11 am
“…it presents another view in favor of small business (versus the goliaths you seem worried about)…”
Posted by: progressive mama | Feb 22, 2010 1:49:57 AM
Posted by: James Danley | February 22, 2010, 10:17 am 10:17 am
If the federal government is allowed to go after the “goliaths” it won’t be long before the federal government goes after small businesses.
–
Its the goliaths that kill small business, and the Republicans that aid them in doing so. Look, the bill isn’t what I’d propose, frankly, single payer would untie the burden of health care from business and do much more to control cost. But your meme is faulty at best. And very ginned up. When people have to use gross exaggeration to make their point, its a tell that they don’t have a very good point.
Posted by: progressive mama | February 22, 2010, 2:44 pm 2:44 pm
Posted by: Keith | Feb 22, 2010 10:11:53 AM
Mutual insurance companies solve the issue of pre-existing conditions for individual and small group policy holders how again?
Oh, it isn’t addressed?
Moreover, unless Congress is able to pass a health care bill, consumers will continue to see double-digit rate increases. And until we really dig in to “cost” by insuring everyone and expanding measures that are found to work via the pilot programs, medical inflation will be a major burden on the economy.
Posted by: progressive mama | February 22, 2010, 3:08 pm 3:08 pm
“…single payer would untie the burden of health care from business and do much more to control cost.”
And it would strip individuals of their Individual Freedoms! But I guess you place a higher priority to lowering cost than about individuals having the right to choose their own healthcare! So I guess if healthcare costs are less by denying medical procedures to the elderly or to patients with chronic ailments that’s okay! I know you will say that’s happening right now…and you would be right. But at least right now a patient can shop around for an alternative insurer if they don’t get the coverage they want or need. Once the government takes over as a single-payer, you have no choice but to do as the federal government says!
Posted by: James Danley | February 22, 2010, 3:26 pm 3:26 pm
So I guess if healthcare costs are less by denying medical procedures to the elderly or to patients with chronic ailments that’s okay!
—
So are you a hypocrite or do you support Paul Ryan’s attempt to tackle the deficit? Or ending Medicare all together?
Hmmmm?
If not, what exactly do you propose– and are you as limited in knowledge about the issues as this question suggests or are you playing bean bag?
Posted by: progressive mama | February 22, 2010, 3:59 pm 3:59 pm
But at least right now a patient can shop around for an alternative insurer if they don’t get the coverage they want or need.
—
Sure, they can. I’d include a LOL if it wasn’t a bit more serious than all that. Try telling that to our builder’s wife, a beautiful, healthy 37 y.o. with asthma who was in an accident two years ago and simply can’t get anything approaching affordable health insurance in our state’s individual and/or small group market due to pre-existing conditions.
Posted by: progressive mama | February 22, 2010, 4:04 pm 4:04 pm
Progressive mama, first I’m sorry for your builder’s wife. Her situation is exactly what a healthcare reform bill should cover. Instead of overhauling a system where 85% of the people are satisfied with their healthcare coverage (or satisfied to pay cash for their healthcare), Congress should set up and subsidize (patients would still pay a premium according to income) a private healthcare insurer that handles catastrophic cases and pre-existing conditions (instead of banning current healthcare insurers from denying coverage for pre-existing conditions).
As for Medicare, if I had been a member of Congress in 1965 I would have voted against the bill. It is the law now, so I would not cut coverage. I would, however, have Medicare do a better job of detecting and prosecuting fraud and abuse of the system. Many are satisfied with their supplemental insurance to cover what Medicare does not currently cover.
If I was the sole decider regarding our deficit, I would immediately slash 10%-15% of all discretionary, non-defense spending. In addition, I would make the Bush tax cuts permanent and implement an additional 10% across-the-board tax cuts. I would then make a massive change to our tax code. My first choice would be to elminate the federal income tax altogether and replace it with the Fair Tax. If the federal income tax could not be revoked (it would require a Constitutional Amendment) my second choice would be to eliminate the progressive feature of our federal income tax rates.
Right now the federal income tax liability for a single individual who makes a million dollars a year will owe:
10% of the first $8,350;
15% of the next $25,600;
25% of the next $48,300;
28% of the next $89,300;
33% of the next $201,400;
35% above $372,950;
For a total of $327,684
Instead the tax brackets should only determine the tax rate–whatever bracket your total income falls THAT is your rate for your entire income. Thus in the above illustration the individual would owe 35% for the entire one million dollars–$350,000.
Posted by: James Danley | February 22, 2010, 6:36 pm 6:36 pm
As a follow-up on the Fair Tax, instead of the current proposal to send everyone a check to reimburse the poor and lower income earners, duty-free stores should be created. Every product–albeit generic brands of said product–would be available, including appliances.
The beauty of the Fair Tax is that you can also elminate the payroll tax, because a portion of the Fair Tax would go towards Social Security and Medicare. That would also mean employers would no longer have to pay an equal shair of the payroll taxes.
Posted by: James Danley | February 22, 2010, 6:47 pm 6:47 pm
Posted by: James Danley | Feb 22, 2010 6:36:02 PM
I honestly don’t see how 10-15% discretionary spending cuts alongside tax cuts, with no reform of Medicare, Medicare Advantage (and actually health care), Social Security and military spending tackles the problem. Unless you don’t care about the deficit at all and want to carry on with that forever and a day. Not sure whether I’ve seen you bellyaching about it or not.
Posted by: progressive mama | February 22, 2010, 7:03 pm 7:03 pm
That would also mean employers would no longer have to pay an equal shair of the payroll taxes.
Posted by: James Danley | Feb 22, 2010 6:47:50 PM
And the revenues we’d collect would increase by how much? Or they’d decrease? I’m not opposed (seriously, I own a business and so does my husband) if it doesn’t unfairly shift the tax burden to the poor and isn’t completely unrealistic.
I also need to absorb this notion of duty-free shops. How would that work logistically? And wouldn’t it be just as valid to offer people duty-free vouchers and the ability to turn them in at local shops (sorta like food stamps)?
Posted by: progressive mama | February 22, 2010, 7:16 pm 7:16 pm
First of all, you can’t really expect the perfect solution for the nation’s deficit being reversed in a short paragraph or two. But here are some additional thoughts on that goal.
Instead of employees and employers paying into Medicare and Social Security, EVERYONE (except those purchasing in duty-free stores) would pay into Medicare and Social Security when they purchase a product or pay for a service. The Fair Tax that was brought before Congress, as I recall, was to be a 23% national added value tax. I don’t know how much of the added value tax was under consideration for Medicare and Social Security, but I would estimate about 4% for Medicare and 7% for Social Security, that would leave 12% for the general budget.
As for Social Security, by taking the employee/employer element out of it, we never have to worry about the fact that there will eventually be 1 recipient for every 2 workers. That’s because EVERYONE (except those purchasing in duty-free stores) will now be paying into Social Security–including Social Security recipients that are not purchasing in duty-free stores.
I would hope that Congress would pass a Constitutional Amendment prohibiting Congress from ever using Social Security and Medicare revenue for any other purposes. A REAL trust fund should be created for each.
Now as for the duty-free stores. I have previously tossed the idea of anyone using these stores. But I now believe that only those individuals who are receiving food stamps or associated debit cards would be allowed to purchase from these stores. ONLY food stamps or associated debit cards will be accepted and IDs will be checked. No added value tax will be charged on purchases from the duty-free stores.
Now then, with the elimination of the federal income tax and payroll taxes, everyone will take home their entire paycheck. And employers will save a bundle! This will stimulate spending and create more jobs. With more people working, they can afford to spend more. The more spent…the more revenue from the 23% added value tax.
NOW HERE IS A NOVEL THOUGHT! The 23% added value tax would also be charged on all political contributions–not by the contributors but by the recipients of the contributions. So politicians would actually pay twice: Once upon receipt of the contribution; and then again upon purchasing a product or service with that money.
Posted by: James Danley | February 22, 2010, 9:40 pm 9:40 pm
Posted by: James Danley | Feb 22, 2010 9:40:56 PM
I appreciate your explanation. I think I’ve let how turned off I am by several of the messengers turn me off to the idea (I’m not talking about you) I’ll have to read up on it, because a couple things are nagging at me, but I like other things about it and I’m not as well versed on it as I’d need to be to ask the right questions (plus this isn’t really the forum for that, lol.)
Thanks again. Always open to new solutions.
Posted by: progressive mama | February 22, 2010, 10:59 pm 10:59 pm
Progressive mama, Mike Huckabee has a great explanation of the Fair Tax. You can Google it. However, he favors mailing everyone a check to offset the poor paying the tax. To me that is a lot of money for postage and the cost of the paper. If the duty-free store doesn’t pan out (think of the jobs that would create), at least by having the food stamp debit card programmed to not deduct the tax from the card would allow those on food stamps to purchase their food without paying the tax–thus no refund is necessary.
Here’s another interesting aspect of the fair tax. 23% sounds like a lot, however when the other taxes are no longer passed on to consumers the prices of many products will be lowered dramatically. So a product that has taxes passed down and used to cost a dollar, it might now be more like 85 cents. So instead of paying a total of $1.23 for that item, you will now be paying about $1.05–which is less than you pay now for the item.
Posted by: James Danley | February 23, 2010, 12:35 am 12:35 am
As George Will pointed out on This Week, the annual profits for the entire health care industry would pay for 2 days of our countries health care. The problem is not the insurance companies profits but the rising costs of our system. The demonization of the insurance industry is just more Alinsky crap.
Posted by: Ralph | March 8, 2010, 2:54 pm 2:54 pm